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Illumina board rejects Roche's hostile bid again

$5.7bn offer described as "grossly inadequate"

Roche's hostile takeover bid for Illumina was unanimously rejected by the diagnostics company's board yesterday as "grossly inadequate" and "opportunistic".

In January, Roche made an offer of $44.50 per share for Illumina - or around $5.7bn - which was an 18 per cent premium to the company's share price before the bid was made public.

Illumina's share price closed yesterday at $51.80, and shareholders have until February 24 to act on Roche's offer.

In a statement, Illumina said Roche's offer "is grossly inadequate in multiple respects … and fails to reflect the value of the company's unique leadership position and future growth prospects".

When making its bid, Roche said that the acquisition would strengthen its position in the diagnostics market and allow it to offer a "total solution" to researchers working on biomarkers for use in drug discovery and the selection of patents for targeted therapy.

It argued that its scale, global distribution muscle and diagnostic development expertise would help Illumina grow its business more rapidly, and said it had made the hostile bid only after being rebuffed on several occasions by Illumina's management.

Responding, Illumina says it has one of the strongest brands in the life sciences tools area, particularly in the area of genetic analysis, with a 60 per cent share of the next-generation sequencing market.

Around 90 per cent of the world's sequencing output is carried out on Illumina instruments, claims the board.

Moreover, Illumina says it has a proven financial records - delivering compounded annual increases in revenue of 42 per cent and 26 per cent gains in earnings per share since 2006 - and  is poised for "extraordinary growth as genetic information becomes broadly applied beyond molecular biology research and into medical diagnostics", particularly in the area of personalised medicine.

Roche's bid is an opportunistic tactic to capitalise on a period of weakness in Illumina's share price which belies its history of an 84 per cent return for investors over the last five years and a 52-week high of more than $70.

Illumina has been trying to ready its defences against Roche by adopting a rights plan granting existing stockholders the right to buy shares at a discounted rate, and "golden parachutes" guaranteeing generous payments for executives if they lose their jobs within two years of a takeover.

An attempt by Roche to expand Illumina's nine-member board with an additional two positions has also been rebuffed.

"We continue to believe that our highly qualified, independent directors are better positioned to act in our stockholders' interests than directors selected and compensated by you to advance your own strategic objectives at the expense of our stockholders," says Illumina's board in an open letter to Roche chairman Franz Humer.

8th February 2012

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